Due diligence means making findings of a thing before making an agreement or signing a contract with someone for that thing. This is done to ensure that a particular standard is met.
Visit https://en.wikipedia.org/wiki/Due_diligence to learn more about the meaning of due diligence. Due diligence can be done for several things, including when purchasing real estate. When it comes to real estate, one due diligence that can?t be neglected is environmental due diligence. It typically is done to find out if a piece of land has any contaminants.
The standard procedure for this assessment is known as Phase I Environmental Site Assessment (ESA). However, in some cases, this standard procedure might not be required. In such cases, a shorter and quicker version of the process can be carried out. This is typically referred to as a desktop environmental report. In this article, we will be discussing everything you need to know about this process. Let us get right into it.
What Is A Desktop Environmental Report
A desktop environmental report refers to a sort of partial due diligence done on real estate. This process is used to evaluate environmental risk and is relatively low-cost (when compared with ESAs). You can think of it as a preliminary form of ESA.?
It oftentimes is used for properties that have unknown histories and are presumed to have low or moderate environmental risks. This is to say, it is done on properties that do not have any known contamination sources.
Purpose of A Desktop Environmental Report
As we have already said, this assessment tool is quite limited. Typically, it is mainly used by landowners or property buyers to evaluate a property?s potential subsurface contamination hazards and risks.
However, legal or definitive recommendations or conclusions cannot be made with this report because its background information is usually limited.
It is important to note now that this report isn?t an ESA and that it doesn?t meet the standard guidelines and practice for ESA.
Certification
When an ESA is done on a property before it is bought, the landowner may be considered a contiguous landowner and won?t be liable for contaminants found on the property. But, as we have already said, a desktop report doesn?t meet all the requirements of a standard ESA.
Due to this, a landowner that does it won?t be protected by the CERCLA as a contiguous landowner. You can read this post to find out more about this.
Furthermore, this report doesn?t address any local, state, or federal laws requirements. Finally, the process isn?t intended to address every safety concern (that is if any is found) linked with the property.
Limitations
If you decide to go with a desktop environmental report, you need to know that it has its limitations. Sometimes, some environmental conditions may be present within the property and may go undetected throughout the process. This doesn?t mean that the process wasn?t carried out properly. Rather, the reason for this is that this review?s scope is limited, hence, contaminants not detected may be beyond the review?s scope.
Due to this, consultants would not and can?t even guarantee conclusions that are made by these reports. Put frankly, statements that are made within these reports are observations and opinions made with available information and most often reasonable judgment.
More often than not, consultants will tell you upfront that these reports aren?t to be presented or seen as factual representations. They most likely will make notes of deletions, data gaps, and limitations.
Finally, if you decide on doing this report, you must know that they are restricted to the period and date that the evaluation was done. All in all, this process is quite limited and may not be the best option most of the time.
Packages
Depending on the consultant you hire, there typically are several desktop environmental report packages available to you. Some consultants even allow their clients to customize the report to suit any special requirements they may have.
As we have already said, these reports are typically for properties that have a low or moderate risk activities history. For instance, a commercial site that is used strictly as an office space that is opposite a gas station.
So, if your property or the property you are looking to buy is riskier, the best option would be an ESA.
Conclusion
Desktop environmental reports are limited environmental due diligence that is carried out on properties considered to be of low or moderate risk. While this process can evaluate a property and figure out if contaminants are present, it doesn?t offer the protection that a standard ESA offers. It typically doesn?t meet the requirements of local, state, and federal laws, hence it isn?t legally binding. So, if it is done on a piece of land and contaminants are found but you go ahead to buy the land, you would still be liable for the repairs.
